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US SEC freezes assets of an offshore fund and its operators.

BIScom Subsection: 
Editorial Staff

The USA's Securities and Exchange Commission has frozen the accounts of a foreign registered fund operated by two US residents.

The Court granted an order freezing the assets of an offshore vehicle known as the "Income Collecting 1-3 Months T-Bills Mutual Fund". It is not clear where the accounts are nor is it clear in which jurisdiction the Fund was organised.

It is alleged that Ofer Abarbanel of California and Victor Chilelli of Delaware and New York have engaged in a scheme to defraud investors.

Seriously: we had to read this report several times to be sure that we were not reading a spoof, especially when the alleged laundering scheme is described. But it's real. The names really are that strange and the SEC really does allege laundering 1.01 scheme.

The fraud was simple: Abarbanel, it is alleged, represented that the Fund would, primarily, invest in US Treasury securities and would enter into "certain types of reverse repurchase agreements with U.S. Treasury securities serving as collateral."

That's not what happened, the SEC says in its court papers. In fact, the proceeds were paid into the Fund and then remitted to one of several shell companies, which are also named in the action. These are Institutional Syndication LLC, North American Liquidity Resources LLC, Institutional Secured Credit LLC, Growth Income Holdings LLC, CLO Market Neutral LLC, and Global EMEA Holdings LLC. Their domicile is not disclosed but if we were to guess, we'd go with Delaware.

The proceedings are in civil court as breaches of the anti-fraud provisions of federal securities laws in which results can be civil penalties, orders for surrender of moneys obtained and pre-judgment interest (the US calls this "disgorgement"), the conversion of the emergency injunctions to permanent and orders banning the individuals from involvement in future securities offerings.

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